Investment Strategy
We seek to pick winning funds with superior management and quantitative characteristics linked to strong performance. Our quantitative research uses the most comprehensive mutual fund database in the world to determine the best strategies for long-term investing success. We then supplement those studies with extensive qualitative research of portfolio managers, analysts, and traders through onsite visits and follow-up phone calls.
 
About the Editor
Russel Kinnel is director of manager research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors. He also writes the Fund Spy column for Morningstar.com, the company's investment Web site.

Since joining the company in 1994, Kinnel has covered the Fidelity, Janus, T. Rowe Price, and Vanguard mutual fund families. He helped develop the new Morningstar Rating for funds and the new Morningstar Style Box methodology. He also is co-author of the company's first book, The Morningstar Guide to Mutual Funds: 5-Star Strategies for Success, which was published in January 2003.

 
 
May 28, 2017
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About Russel Russ' Photo
Russel Kinnel,
Director of Manager Research and Editor, Morningstar FundInvestor
Russel Kinnel is director of manager research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors.
Featured Posts
5 Upgrades and 4 Downgrades
We made many Morningstar Analyst Rating changes in May, so let's review.

Upgrades
Meridian Growth MERDX and Harbor Bond HABDX were upgraded to Silver from Bronze. Schwab Total Stock Market Index SWTSX and Schwab S&P 500 SWPPX were upgraded to Gold from Silver. Finally, T. Rowe Price Growth Stock PRGFX was upgraded to Bronze from Neutral.

The two Schwab fund upgrades reflect fee cuts that Schwab has made to make the funds competitive with the very best.

The T. Rowe Price Growth Stock upgrade reflects growing confidence in Joe Fath, who took over three years ago. We're impressed with the transition and with Fath's knowledge of the names in the portfolio. He has tweaked the portfolio to have fewer holdings, but the emphasis is on big names, so that the fund is a bit more like Russell 1000 Growth than it had been.

At Meridian Growth, declining fees and continued strong execution from Brian Schaub and Chad Meade led us to raise the fund.

Harbor Bond's upgrades matched our earlier upgrade of PIMCO Total Return.

Downgrades
We lowered Fidelity Extended Market Index FSEMX to Silver from Gold. American Century International Growth TWIEX and Weitz Value WVALX were cut to Neutral from Bronze. Morgan Stanley Institutional Growth MSEGX was lowered to Bronze from Silver.

The Fidelity Extended Market Index downgrade reflects challenges it has faced in tax management.

American Century International Growth was downgraded because of high fees and spotty performance.

Weitz Value was cut because of a management transition, change in strategy, rising fees, and disappointing performance.

Morgan Stanley Institutional Growth was cut because of its challenges in managing a high-risk strategy.

Meridian Growth
Here is Greg Carlson's take on Meridian Growth:

Meridian Growth's sensible approach and proven skippers, along with declining fees, earn it an upgraded Morningstar Analyst Rating, to Silver from Bronze. When managers Brian Schaub and Chad Meade took over this fund in September 2013 after Arrowpoint Partners (recently renamed ArrowMark Partners) purchased the fund's previous advisor, they brought a history of strong returns and below-average risk with them from a 6.5-year tenure at Janus Triton JATTX and a 2.5-year tenure at Janus Venture JAVTX. At this fund, where (as at Triton) they invest in a mix of small- and mid-cap growth stocks, they have fulfilled expectations thus far. From their start date through April 2017, the fund surpassed 84% of its small-growth peers and its Russell 2500 Growth Index benchmark (a better measure, as it too holds both small- and mid-cap stocks) on both a total return and risk-adjusted basis. They're also off to a strong start at Meridian Small Cap Growth MSIGX, which, like Janus Venture, is a pure play on small caps.

Meade and Schaub have compiled this impressive body of work by focusing on companies with fairly steady and growing revenues and relatively sturdy balance sheets. Though they're sometimes willing to pay up for rapid growers, they tend to buy fewer such names than most peers. While the fund tends to sport a hefty weighting in industrials (its 30% stake at the end of March was nearly double the small-growth Morningstar Category norm), the majority of those are business-service firms such as residential services provider ServiceMaster Global SERV rather than pure cyclicals. The managers also tend to be more patient than most competitors; portfolio turnover was 57% in 2015, below the small-growth norm of 73%.

As expected, the fund has held up well in market declines, losing 84% as much as its benchmark. Fees have declined, too, as management and the fund board have worked to cut costs at the share classes launched since the managers took over. (The no-load Legacy shares are available only to owners of other Meridian funds.) This is an attractive choice for smaller-cap exposure.

 

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